Download the transcript (includes graphs).

Gunter Wessels, PhD is the healthcare practice principal at Total Innovation Group and is also an author of articles about changes in healthcare initiatives including HCAHPS and value-based purchasing. Today he’ll be showing you how to recognize the elements of HCAHPS and healthcare reform that are driving quality process improvements for hospitals right now. He will also examine implications in care delivery planning and personnel development.

Opening comments from Gunter Wessels
I co-authored an article with a colleague of mine in Pearl Andrews that made the cover of the healthcare financial manager’s journal in August of 2009 about value-based purchasing and HCAHPS implications before final rules were out. We were able to make some predictions that were quite accurate in the final rule making. By digging into what the lawmakers and policy makers are doing in committee and draft bills you’re able to see a lot of what ends up coming down the pipe.

These principals and concepts are embedded in a lot of healthcare reform and with respect to patient-satisfaction measuring have clearly defined purposes and have been articulated for years now. I hope to give you a trajectory down the road.

An outline
We’re going to focus heavily on Quality Based Payment as a methodology of healthcare reforming, reshaping in America today. We’re going to review the HCAHPS survey a little bit of technical detail but really kind of netted out. We’re going to look at the application of Accountable Care Organizations, we’re also going to look at Value-Based Purchasing, how that affects care delivery and payment for care and we’re going to talk about some problems that you can identify. How to prioritize some action, how to apply a framework that you can use to affect change in your own organization and then some short recommendations about what you might consider doing.

Will healthcare reform stick?
A lot of folks ask, “Is this even going to stick?”

We take a poll whenever we are in a public and it’s surprising. Depending on where you are in the country, people believing in a full-scale repeal of the healthcare reform law are higher concentrated in some areas than others. Most provider clients tell us whether or not it’s going to be repealed, the time has come to plan for it as it is right now knowing that things will change.

Some things you can rely on though. Health reformers have a couple of simple priorities and I’ve listed them here for you.

Aligning incentives
The Government really does believe it can get more value for the money it spends on healthcare through the Medicare and Medicaid programs. Value-Based Purchasing is an example of healthcare reform where they try to get value for money.

Pay-for-Performance programs are same thing. In fact, Value-Based Purchasing is a special case of Pay-for-Performance. The Government doesn’t want to pay for errors anymore and they’ve included the Hospital Quality Condition Rule in 2007 to help not pay for errors. They want to remove the inherent conflicts an acute care provider faces when the doctors pay for service but providers pay a prospective bundle payment. We’re looking forward to digging into the Accountable Care Shared Savings rules filed today.

They want to reduce rates and that’s the recovery out of contracted program which is contractors coming back holding claims trying to establish medical necessity and in essence charging back and taking money out of provider’s bank accounts.

They want to spend less in a big element of the run-up to some of these reform elements as being pretty significant reimbursement cuts.

A lot of our hospital clients anticipate 10%, 20% reimbursement cuts in specific areas. That puts a tremendous amount of pressure on operating managers to take cost out of the system. They want to make sure things are clinically effective and the NIH is going to do comparative effectiveness research. We’re going to have a lot of money spent on a modified FDA approval process that is more sensitive to comparative effectiveness on specific things we use in healthcare.

Last but not least we want our patient populations to become participants in their care delivery and their consumption experience.

That’s really motivating patients to help themselves to prevent disease or have better outcomes. It’s the main reason we have the consumer’s assessment of healthcare providers and systems service, the consumer’s view into what we do overall.

The controversial part of reform as we know is the individual mandate and the state’s mandate and that’s where we’re going to get the Supreme Court to start ruling on when they take the case next.

Hang on to your seats it should be fun.

A quality-based payment system
CMS has taken a bold leadership system in establishing a quality-based payment system and HCAHPS plays a very strong role in that. The initiatives we see today have their origins in 1999 when the Institute of Medicine wrote that famous monograph which was called “To Err is Human.” Then they chronicled healthcare as an enterprise in America is inherently unsafe. That was their assessment in 1999: People are harmed and people are severed harmed as a consequence of consuming healthcare.

Between 44,000 and 100,000 patients per year expire as a consequence of consuming healthcare.

In their analysis the Institute of Medicine said there were systematic and structural issues in healthcare that needed to be addressed and all those recommendations point toward rewarding providers for the quality they deliver. The next step was the founding of Leap Frog, the beginning of core measures reporting for hospital providers.

In the mid-2000s Tom Valik, who was running the Value-Based Purchasing Initiative, went on record as a CMS administrator saying the goal of value-based purchasing is to transform Medicare from a passive payer of claims to an active purchaser of value.

What that means is value-based purchasing wants to make Medicare more like a private payer.

Now the difference between Medicare and a private payer today is not just rate-specific; it’s philosophical in the way coverage is managed, who can enroll and so on. Medicare has been very liberal as a payer covering a lot of different things. They’ve also kept the co-insurance levels uniformly independent of where the provider is and where the patient is. The amount of healthcare co-insurance is the same in Florida as it is in Washington. There is also the same on the outpatient side but transforming Medicare into a private payer puts into consideration the ability to guide provider behavior with incentives, which we’ll cover, and also which is not being officially promulgated yet but we’re expecting it come, begin to guide patients and provide them with incentives by adjusting their co-payments.

To guide patients and move volume around, you need the infrastructure value-based purchasing and its reliance on HCAHPS provides. With value-based purchasing and core measures reporting, we have a system to rank hospitals and providers and physicians in the Physician Quality Reporting Initiative (PQRI). They are ranked on the quality of care delivered (including the patient experience).

Ranking people allows us then to treat them differently, first through reimbursement adjustments. We’re fully expecting volume shifts and incentives aimed at patient participation to come next. HCAHPS gives us a strong hint in that direction.

A standardized patient survey
The purpose is to provide a standardized survey. Many providers for years have been serving patients but there wasn’t anything uniform out there.

The HCAHPS Survey was then adopted and the Agency for Healthcare Research on Quality studied this and developed the HCAHPS version in 2002. They needed to be able to have a uniform measure of quality if from the patient’s perspective.

The HCAHPS Survey has six summary measures, two individual measures, and two global measures reported for you if you’re not a non-exempt facility. Now everybody has to do it. You have to do it every month and you have include a random sample of patients, not just Medicare patients. The survey was developed or refined by the Agencies for Healthcare Research and Quality and endorsed by the National Quality Reform in the mid-2000s. The content is 27 questions, 18 of them are about critical aspects of the care delivery cascade including did you get good instructions from your provider/your caregivers? Were nurses available? Was your pain managed? Was the room clean? Was it quiet at night? Were you able to sleep … Things that are palliative in nature. Oftentimes, consumers can’t judge adequately for themselves whether or not that was the case.

The problem with quality ratings
Now there are some problems having consumers to rate you on your quality. The key here? It’s random delivery. You can only get HCAHPS scores if you are an approved survey taker so most of you have an HCAHPS vendor you use (or you can apply and become approved by CMS directly if you can meet certain criteria that are arcane and a little bit out of scope). The survey itself is delivered by phone or with mail and integrated voice response or telephone follow-up so we’re calling random people and we’re calling them every month and, again, not just Medicare patients.

How did we get here?

The process started with a vision for reshaping healthcare that often times gets assigned to President Obama. He has become the figurehead for this but most of what we see in reform today is a consequence of some senators in the Tri-Committee bills glued together with the Senate Finance committee through a ratification process – along with things that came in from the late Senator Kennedy’s group.

Now through this big sausage-making exercise, the intention was to improve the quality and accessibility of healthcare in the US. Then Congress created a 2-000-page law which is likely to turn into 100,000 pages of regulations because every time the law says, “The Secretary shall…,” Congress is directing the Secretary to tell CMS to make a rule. So every “The Secretary shall…” creates a rule and you’ve seen Medicare rules. They can be very complex and the devil is definitely in the details.

So the rule-making process is ongoing but you can rely on the principal in the law to help shape the rule. If you and your hospital associations are vigilant, you can come in on them and begin to change them.

Many senior leaders are considering getting into an accountable care organization. HCAHPS features prominently in accountable care. ACOs are a key feature of patient protection but they require a tremendous amount of administrative oversight, in addition to managing risk and coordinating care. Just being able to comply with the Medicare version of accountable care requires seven additional participation and experience measures.

There are care coordination and measures, special patient safety measures, and outcome measures as well because ACOs want to reduce utilization, streamline care, reduce duplicates, and reduce unnecessary diagnostic information and unnecessary therapies. So the basic issues for the shared savings rule haven’t changed how to implement them. The idea is to be a care coordinated a patient-centered organization.

The value-based purchasing law (VBP)
The law says we need to measure spending per beneficiary.

Spending per beneficiary has to do with the utilization AND the doctor. Sometimes, a patient simply demands the doctor do something! So the doctor does: Not necessarily something efficient, but something that makes the patient happy. But value-based purchasing is based on this notion that we’re going to be tracking spending per person making the organization, the enterprise of healthcare, more efficient over the long term. So don’t forget, there will remain a practical element.

VBP is not intended to be a penalty-only based system. The weights are the way we’re going to transform this big system into a “fair” delivery system that ranks providers equally across the country.

CMS is going to stack rank the entire provider, the entire non-exempt provider universe in the US so every hospital will be put on the same scale and ranked in order based on the amount of points that they can acquire using this logic.

The first graph below shows a representation of a core measure with some pretty wide variance, we just called Generic Core Measure. During a performance period, your hospital will report and the abstractors will submit how the organization does in attaining its core measure performance. That distribution of core measure attainment will then be put into the computer in the sky and percentiles, thresholds will be set up based on percentile achievement. So the trick here is that the national average, the average of core measures in specific areas becomes this red line and that is the dividing line, the 50th percentile of core measure attainment. Now there is organizations that are doing the best become the benchmark threshold, they become the difference between 9 and 10 and then 1 you know, there is the top decile performers, that’s the top of the curve.

The size and percentage attainment difference between the 50th percentile and the 90th percentile can be very very small especially in measures where organizations are all doing well. So if everyone is delivering smoking-cessation advice and everyone is at 99%, we still have to separate 3,600 hospitals into a percentile ranking – so very small changes end up having a very large impact.

In the second graph, if you’ve got poor performance, the difference in the points you get would be two out of a potential ten. Your historical performance provides you the context for your improvement. You can get bonus points added to your point total if you improved over those previous years.

The idea is to have even organizations that are performing very well to continue to stay on that improvement curve. You can get additional points and therefore a higher national ranking and more incentives that pull monies back to you if you’re at the high end of the curve. You still improve because you can get the benefit of improvement to come on to your side.

It’s a blend of core measures attainment, evident-based guidelines, smoking cessation, discharge instructions etc. all of those kind of boundary-spanning enterprises that become your core measure set and then we’re going to how this all varies.

As I’ve indicated before, a lot of these measures don’t have a lot of variance so it’s very hard for us to come up with a stack ranking and the CMS has gone ahead and issued a linear exchange function which is a mathematical correction they’re going to apply to try and create some distance between hospitals.

As a provider, if you miss one or two measures, the consequences will be negative. You want to show forward progress – no matter how small. Small forward changes can have a disproportional impact in moving you up but small changes on the negative can also have a disproportional effect.

Additional measures
There’s going to be spending per person, serious complications, hospital conditions, and something like a patient satisfaction driver or detractor, say, emergency department wait time.

Those of you trying to improve core measures, look at ED and patient flow. You make more money if you improve patient flow and you steer clear of a potential problem: Having long ED wait times, having it publicly reported. We’re expecting a lot of more activity in that area: Central line infections of course, surgical side infections, temperature management and so on. These are additional things that are being kicked around as new measures to be added.

HCAHPS
Value-based purchasing your incentive payment is a conglomeration between core measures performance and HCAHPS performance.

We advise you to look up your organizations and those you admire on the links below.

http://www.hospitalcompare.hhs.gov/staticpages/for-consumers/value-based-purchasing.aspx

CMS is considering the following measures for the Hospital Value Based Purchasing Program:
• Spending per Hospital Patient with Medicare*
• Serious Complications and Deaths*
• Hospital Acquired Conditions
• Emergency Department Wait Times*
• Heart Patients Given a Prescription for Drugs called Statins at Discharge. (AMI-10: Statin Prescribed at Discharge)
• Central Line-associated Blood Stream Infection
• Surgical Site Infections
• Immunization for Influenza
• Immunization for Pneumonia
• Temperature Management for Patients after Surgery (SCIP-Inf-10 Post-operative Normothermia)

We emboldened some of these because the variance in measure performance is not very high across the survey.

Interestingly enough the high variance measures that we’ve done the analysis has to do with responsiveness. How clean and quiet the environment is and how well discharge goes have quite a bit of variance but the one that matters the most is the likelihood to recommend / overall rating of the hospital.

Patient Experience of Care Measures
HCAHPS: Hospital Consumer Assessment of Healthcare Providers &Systems Survey (HCAHPS)
• Communication with Nurses
• Communication with Doctors
• Responsiveness of Hospital Staff
• Pain Management
• Communication About Medicines
• Cleanliness and Quietness of Hospital Environment
• Discharge Information
• Overall Rating of Hospital

But there is a problem in gluing together core measures performance with HCAHPS.

In March 2009, we studied 2172 hospitals. We looked at the correlation between the actual objective Quality Performance and Core Measures and the HCAHPS reform and as you can see the correlation there is a 1.10. That’s not very high at all; it’s quite low 10% crossover.

Correlation between Core Measures Performance and HCAHPS
CM:HCAHPS = 0.103

Now if you control for some potential dissatisfiers because we didn’t like that number when we did it and we thought that maybe you can control for efficiency, affordability because if the place is too expensive then that’s a potential dissatisfier and mortality and you run the correlation again, statistical control for those, the correlation actually goes down!

Correlation Including Measures of Efficiency, Affordability, and 30 Day Mortality and HCAHPS
CM-Efficiency-Affordability-Mortality:HCAHPS = 0.085

Now this is kind of a problem, why would regulators put what-you-can-objectively-do next to what-patients-think and then pay you in a quality-based payment?

It actually defies logic if you just look at the simple correlation.

A personal healthcare experience
My family consumes healthcare every now and then.

We had a daughter born in a maternal child service facility in our local town and we were happy to be there. We thought the place was it had a good brand, a good reputation, we were happy to be there and we were scheduled late because it was full.

So we walked in and my wife goes in to deliver our baby. They called the birth at 17:49 and we go to recovery and we find out that that’s an hour in the future! They called the time wrong.

That’s a small mistake. It’s not a really big deal but it took three visits for medical records to fix that and – this is in Arizona – we don’t buy into that whole daylight saving time scam so we never change clocks. It was really odd the clocks were wrong or they were misread but not big deal.

But when we went up to the pavilion and opened the door, there is a smell, and not a good smell. The room smelled bad.

I looked down at the floor there was what appeared to be fur growing on the floor, black sticky dust, and I mean it sticks to shoes and socks and now I had to wash the shoes and socks. We called housekeeping routinely – three times a day actually for three days! – and on the 3rd day the housekeeping came in and cleaned the bathroom, they didn’t clean the floor.

Apparently we trampled enough of the fur flat for them I suppose.

We were hitting the pain button all the time. My wife had a procedure and we’re asking for pain management. She’s uncomfortable constantly in a one-to-four nurse-to-patient ratio. So we were begging for help.

And when it came time for us to leave, my daughter was discharged an entire day before my wife! Now, they can’t leave without each other.

That was an unsatisfactory experience and as a consumer We did not give them good scores on the survey.

We weren’t harmed during that episode but it’s clear that the organization was struggling with some very broad boundary-spanning issues from the accuracy of medical records to the ability to correct them, to be able to get the cases wrapped up and improve patient flow; it was a severely challenged organization.

We actually went back, we had another delivery there fairly recently, and the entire organization had changed.

Everyone was more customer-focused – the experience was night and day – and as a consequence of the CEO spending a lot of time investing and round-tabling in Town Hall meetings and so on and this resolute focus on improving patient experience.

We had a great time and see that’s one of the key things you need to do because HCAHPS is a good proxy for you to be able to determine what your brand equity is. This lack of correlation between your core measures and consumer assessments is not because consumers are bad at assessing the quality of healthcare. There is other things that drive it, brand being one of the biggest ones, and your brand is highly personnel-driven because the interaction a patient or a visitor has with every one of the staff is the opportunity for that brand to be reinforced or to be undermined.

It’s not what we put on our billboard it’s how we work with our people and how our people work with our patients. That’s probably the most potent weapon you have in being able to survive a quality-based payment system that incorporates consumer assessment. Improving employee experience is a key tool that you’re recommended to take a look at.

References:
CMS Report to Congress: Plan to Implement a Medicare Hospital Value-Based Purchasing Program November 2007
Senate Finance Committee Report: Transforming the Health Care Delivery System: Proposals to Improve Patient Care and Reduce Health Care Costs 2009

Wide-variance core measures are the ones you need to focus on compared to national average. Heart failure is one. If you’re able to improve in that area, keep going. Decide if you want to go after an improvement or prevent a slippage. Think of forward-progress as a preventative defense versus a performance improvement initiative. A lot of well-performing organizations are spending a lot of time rethinking their quality processes to determine how they can minimize defects rather than maximize other processes.

The way HCAHPS connects directly to your financial performance this year is you have to report patient safety measures, you have to report your readmission, and those are not weighted and scored in the value-based purchasing calculation. Only 17 core measures are. These are given a weight of 70%.

HCAHPS patient satisfaction (around 300 records randomly selected every month) is 30% of it.

Now again there aren’t too many opportunities for us to miss here. If patients are happier with you because they like your brand and they like your employees, you can overcome some potential slips in the actual core measures themselves.

Money up for grabs
The average risk in 2012 is $800,000 almost a million dollars for the average hospital. There is no such thing as an average hospitals but that’s the national mean. If you look at the median it actually goes down. The median risk in 2010 was $250,000 and the five-year average as you roll up the amount in play was around $1.8 million for the median hospital here. It’s real money.

1% of Medicare reimbursement all the way up to 2% and this is kind of the roll out so national percentile ranking, more measures being added, topped out measures being pulled and it starts with 1% in fiscal 2013 which means in October of 2012 the first cut comes across the board. We’re in a measurement year this year for our new baseline and that escalates up to 2017. Now we’re expecting on the way to 2017, some more of these other incentives to be added, more measures to be added and the pace to accelerate a little bit here.

If you look at specific hospitals you can’t prospectively determine how you’re doing, if you want to look at your own facility there are services out there that benchmark you. The long and short of it is CMS is going to, in August publish the list of where you fall then you’ll know at that point how the linear exchange function works.

It’s almost impenetrable and very very hard to determine ahead of time other than saying, “What’s my maximum risk?” but you can perform in the middle of a pack and still just barely miss it and lose 100% of your risk pool so that’s the reimbursement here where CMS is going to preemptively claw back and amount of money 1% of medical reimbursement and then pay that back based on an earn back on your national stack rank performance.

Think beyond your specific call centers and think more at an enterprise level and look at processes that go beyond just single departments and look for variants there. These are in large part tapping the same thing that core measures are through those global measures like were you able to give discharge advice?

If you’re bad at paperwork and your discharge process is not optimal, you’re probably going to also miss that core measure for discharge advice and you’ll be able to determine it that way so look for high variance areas, reduce that variance and then try and prioritize by applying the COF Framework. Look at things that have Clinical, Operational, and Financial components or processes. Assign stakeholders and get them involved.

Above is a large, nationally known facility. If you look at the length of stay and these are intercranial, these are stroke DRGs, MS DRGs, you know, the day and where the admission source is there seems to be something going on in the ED that goes wrong on Saturdays because the average length of stay in Saturday and there was quite a few people on Saturday that were admitted, 62 as a matter of fact, they came into the ED on Saturday there was a problem, whereas if they’d been admitted through the admissions process outside the ED, things were fine.

Looking for these sort of things and doing some analytics engaging your IT department and looking for sources of variants can help you prioritize this things and again I recommend you go service line by service line starting with your highest volume service like if you have a neuro program, I’d look at neuro DRGs at a very minimum.

The other place where you can look at variants that show up and that will indicate to you something you can hop on and do some improvements is if you look at the discharge destination based on the day of the week.

This is the same facility we looked at a moment ago. There is quite a difference in the likelihood of someone being discharged alive on certain days than on other days and this has actually been found in the HARQ they did some study and they found a weekend effect.

If you want to improve an enterprise process that enterprise process doesn’t just go beyond across specific departments, it also goes across different shifts and managing the weekend. Where patients stay over the weekend they’re more severe but these are pretty severe patients.

Anyway there is something going on over the weekend we probably need to look into here and again there is a positive financial outcome anticipated from reducing variants in these areas. This is just another more extreme example of the same thing of the Monday effect for a very vulnerable population here of stroke patients.

If you boil down quality-based payment and the impact, everybody is going to take a cut, everybody takes a cut and that’s almost unavoidable. We’re going to be having paper cuts for Medicare based on 1%-2% but the Easter Egg and the story around value-based purchasing and the public reporting of this is with that infrastructure in place it is easier for Medicare to begin to segregate and differentiate between different providers based on the quality and customer satisfaction.

The private players are going to use the same infrastructures for the same ends and accelerate – sometimes even beat – CMS to the punch, so you need to think about the contingent liabilities of a lack of quality improvement and potentially dissatisfied patients as a consequence of maybe disgruntlement. Because it’s going to have a multiplication effect. It’s going to spill over into your private pay segment as well so you need to balance priorities and again decide whether you want to go for higher attainment or improvement and try and approve the ones you can, try not to mess up the ones you’re good at already.

So the outlook is for those of you who are doing well congratulations! You’re in trouble because it’s a zero sum.

Everybody is on the same linear percentile ranking for the year and if you’re doing poorly every year you have the opportunity to show improvement and any improvement will give you financial reward.

Again those will be compounded by private payer activities. If you want to prioritize action, think about the balance between the clinical utility of what you’re doing in a specific service line, the mission of the organization if you will, the operational efficiency, the people, the processes and the technology you employ and how you can optimize those and then how the financial consequences come out of that.

So it’s a challenged framework and it actually structures the way reform was built as well because reform is about increasing, increasing prevention, increasing clinical effectiveness, it’s about making sure we have more patients that come in and taking care of and aligning incentives and reducing utilization. It again goes according to clinical operation and financial in a balance way. The board is required to look at this.

Now Quality and Quality-Based Payment including the consumer’s assessment, our board level supervision requirements, the active Inspector General actually issues a special white paper that describes the board requirement in executing their fully initiated duty to monitor quality and quality improvements. It’s on everybody’s dashboard because everybody is held up accountable from the board down, senior leadership as well, a big area of opportunity.

There are many ways to say this but has a direct impact on medical staff management, how you reshape your service lines, how you provide support services, how you train customer service at all different levels, medical staff respond to that and we’re seeing some shifting that as doctors’ groups find the financial pressures increasing, they’re seeking out high quality providers in the area for strategic relationships and we recommend you do that as well.

What should we do?
Well you can hope but hope is not a very good strategy. You can also step in and control processes and try and reduce process variation, that’s one of the key impacts of the IT implementations you’re undergoing right now and IT needs to support your ability to reduce process variance. They also need to help you eliminate process variance.

What I’d also suggest you do is take a look at your ongoing professional practice evaluation as it relates to your hospital and begin to select based on quality and make that a new dimension for you to look at.
To survive in a quality-based payment environment where consumer’s assessments have financial consequences, you must address the potential disconnect between executives and key stakeholders. Some of you have more medical staff on your executive teams than ever to avoid those disconnections. But it becomes an issue where we’re in the culture-making business because the brand has such an impact on consumer assessment and the brand is mediated by your employees. Everybody becomes a brand ambassador which means your job is to be a culture maker and transform the culture.

Staff development and leadership is important and how do we as a healthcare enterprise develop physician leadership? How do we develop leadership within the rank and file? How do we stimulate positive leadership behaviors and how do we maximize that part of our training curriculum? A culture change is rooted in this notion of transparency which is forced upon you by the reformers but also can be a very good way for you to make some positive changes if you adopt transparency.

Recommendation
If you want to control processes, it starts with the employee and then the patient experience. You’ll see your HCAHPS move by making investments in employee engagement. I know you survey employees and I suggest you redouble your investments there.

When you address process variance, I suggest you fade into it.

To Reduce Process Variance
F – Focus on enterprise processes
A – Automate as much as you can
D – Leverage diagnostics
E – Educate all stakeholders

F is Focus on enterprise processes – not discrete department process, but enterprise processes.

A is automate as much as you can. Leverage IT infrastructure to help because automation inherently reduces variance. Busy work is taken away, engagement increases, effect is more positive and so on.

D, leverage diagnostics wherever you can because care pathways begin with diagnosis: That’s laboratory, radiology, and how those touch points set the care pathway in motion, which can have a lot of positive potential impact.

E, You need to focus heavily on the education of your stakeholders. Take your opening as a leader in your organization to educate your stakeholders and your colleagues on the elements of quality-based payment and how your consumers are basically going to help us determine our financial future based on their assessments of our service overall.

The way through this process and the difficult changes that are in front of us is resolutely through education and education on things like leadership and engagement. I’d recommend you if you want to do some heavy lifting in this area again go back to that ongoing professional practice evaluation and begin to do more benchmarking of your stakeholder physicians because they’re so critical in the setup of the right care pathway but you can benchmark physicians.

There are things that get measured with the PQRI which is their Quality Reporting Initiative. They’re used to being measured so surround them with benchmarking versus their payers on:
• Patient safety,
• Practice variation,
• How easy it is for them to get privileged and where they are privileged and why,
• What their impact on quality is and specific core measures,
• How their patient satisfaction scores correlate.

You need to get a download through the CMS but you can dig in, your survey provider can help you with some of those analytics and you can then make the next connection to the financial impact and how they’re utilizing resources. Again, the care episode is clinical and it’s basic but it’s a human enterprise and there are direct financial consequences to the way you utilize resources and the way you focus on care delivery and structuring care pathways.

Having the infrastructure allows private payers to step ahead of the CMS and anticipate the accountable care rule and create ACOs in partnership with organizations. They’re also contemplating the notion of episode-based payments and the question you need to ask yourself is if we’ve got all this data and we know what we are good at and we’ve got to develop a good service line, let’s go engage our payers and work with them to talk about episode-based payment which is eminently compatible with accountable care. It’s probably going to be an outcome of the bundle payment experiment that’s out here as well and more things get included in the same skinny food pellet payment.

It’s a state of nature in healthcare today so how do I get my resources to converge on the more conservative, more satisfying, and more pleasing interaction with people. How can my payers help because payers have the ability to create consumer-focused education materials.

Payers can support a lot of what you’re doing and they interact with, their bills aren’t very friendly either. They get their own ratings as well and we’re expecting as the Government gets more and more measures promoting them that more measures will be happening on the side of payers and going there through the accountable care concept. The accountable care organizations are in essence financial risk holding vehicles.

That’s the show today, I’ll take some questions, Scott.

Scott:
Yeah thanks Gunter on a fantastic presentation I really appreciate it, excellent!
The first one I believe is around the slide you had with FADE Strategy on FADE and the question is you mention as a part of the FADE Strategy the automation aspect. Can you explain a little bit more what you mean by automation, what to automate, I guess, is the question.

Gunter Wessels:
You can make your system smarter to machine-to-machine communication, having your computers on wheels and other things throughout the system and make the building a bit smarter because beds smarter today even wheelchairs are smarter today.

Make sure things are hyper connected. Feed information to the system with an eye to reduce process variation through the judicious application of information technology. It’s not just getting a clinical decision support system that automates diagnosis because it’s machine-aided diagnosis.

There is a ton of back office business processes. Where you put the printer has a marked impact on the nurse’s ability to deliver care. Where you might consolidate work stations or be smarter because you deployed technology; i.e., with an eye to automating those mundane tasks that could be distracting from what’s going on.

I mean it’s a broad and scope area but if you think about how do we automate some of these processes just ask these sort of questions you will be surprised what you hear coming back.

Scott:
On one of your slides the timeline going all the way to about 2017 I think it was so this question is, do you see this general movement here accelerating in force and scope as a result of the upcoming election? I guess would you see that timeframe varying a little bit?

Gunter Wessels:
Rule-making has been slow because they’ve had to do a lot of rule-making at the CMS. ACOs is one of the big ones we’ve been waiting for and they’ve been dragging their feet. We expect the rule-making process to go faster now because there are simpler ones to deal with, at least those that affect providers directly so we expect an acceleration in the process. It’s hard to monitor. Talk to your department, folks in revenue cycle, in finance and in compliance and risk management. Have them keep you up to date with what the latest rules are to the extent that it affects your area of interest.

Scott:
Do you recommend healthcare organizations adopt Lean Six Sigma Process Improvement?

Gunter Wessels:
Lean is all about designing efficiency in and many of you are already and have been on those sorts of programs. Neither Lean nor Six Sigma will solve all of your problems but it’s a philosophy and you’re able to get acceleration if they’re tied to again automation.

We favor Lean because it’s a bit more manageable than full-blown Six Sigma programs in many many departments but both are great approaches to problem solving, both will pay many many dividends for you. We just find that Lean focuses more on the design of workstations and you know, that’s why it’s my favorite, but that’s personal.

Scott:
Okay great. Gunter, again, thanks so much.

We can probably talk more about this and go on for several hours so if you have some different questions beyond this, please feel free to reach out to Gunter directly at Gunter [at] TIGI.net.

Thank you, everyone, for joining us today and have a great rest of the day. Bye bye.
[End of webinar]

Insight from Senior Partner Sam O’Rear

Value-Based Purchasing is a Medicare-driven program and is currently in use by several of the large third-party insurance companies.

Insurance companies have learned to go to higher quality employers with high productivity expectations who want their employees to be well. They’ve also been able to amply prove that the higher the quality of the diagnosis and delivery of care, the lower the overall cost of delivering care to those patients.

Medicare has been studying this for going on five years. They started three years ago with laying down the expectation of Value-Based Purchasing as part of the Medicare program.

Medicare is saying,

We no longer want to pay you or incent you to just deliver care to our patients. A lot of you have made our patients sicker than they were when they came to you. We will not tolerate that any longer.

We are going to now start buying healthcare selectively from those of you that provide higher quality.

In this first wave, we’re going to make this budget neutral, so we are going to collect 1% from everyone and then based upon your quality scores, we’re going to give some of that back to you.

Some of you will never get any of it back because your quality scores are too low. Now how does make you feel?

I bet you want to have higher quality scores so you can get your money back.

Now Value-Based Purchasing is totally based upon core measures and HCAHPS, the Hospital Consumer Assessment of Healthcare Providers and Systems.

HCAHPS is a quality measure that measures patient satisfaction.

70% of the total measurement for Evidence-Based Medicine (EBM) comes from the core measures, that’s the clinical part of the measures, 30% of the measure comes from the HCAHPS or the patient satisfaction survey.

If you meet the 50th percentile, then you’re going to get some amount of money back. You want to be there. What we’ve found though is the difference between 49th and 50th is now eight decimal places!

Now what does that mean?

Eight Decimal Places

The way my hospital CEO and CFO clients work interpret it is every single incidence matters.

It’s not like it will all come out in the wash, we’ll fix it toward the end of the year, we’ll improve the food service, we’ll actually wash the sheets that we put on the beds. You can’t put it off.

Every single incidence now has an impact.

The discussion that really concerns hospital administrators is Medicare might actually direct patients away from low quality and actually direct them toward high quality institutions.

In that case, you’re dealing with BIG swings in revenue … because if I’m scoring below the 50th percentile, there could be a huge segment of my current Medicare revenues pushed away to another organization based on those quality scores.

At some point in the near future, you’re going to have to educate all your hospital clients and make them more sensitive in what does Evidence-Based Medicine mean on the whole. And we don’t even know a lot of the changes we’re going to be required to make in three, four, or 5 years from today. Do you (your customer) have the flexibility in your platforms to hit your numbers?

And your opportunity is: How can you help them hit their numbers?

Your Customers’ Hero or Goat?

The acceleration of change will increase. Changes will be required. You’re going to be answerable to your customers especially if you have the capability to provide a flexible platform.

Did you inform them?

My nightmare if I were in your situation, would you be sitting with somebody five years from now and they say, “George, why didn’t you tell me you had the capability to put me on a more flexible platform?! Because now I’m going to have to … in half of the useful life that I typically would give for patient monitoring … I’ve got to switch off and go to some significant other upgrades or changes because of that.

Department level managers do not see a lot of this yet because they are being asked to pay attention to the day-to-day but it’s the true service-line managers that are the new general managers, and they go across many of these departments.

They typically are dealing with five, six, seven different departments and they become important in this discussion because they are sophisticated, they typically are at the leading edge, they are in all the senior staff meetings, and they are the ones that give this typically the strongest discussion and arguments of looking at the bigger picture of how do I invest more? Because they are going to ultimately pay for the investment, their allocation of the cost of that asset comes to them; they are a piece of it.

There is like three or four service-line managers in bigger institutions that work with special care departments and the OR, ER etc. Portions all of those costs are coming back to them so they have typically an ultimate above a department level manager ultimately in the overall decision as they influence the Board, as they influence the senior executives. They need to be the ones and they’re more accessible typically than if we need to go to the C-level (and there can be a pathway to the C-level) but they’re looking at it on a business level and cost truly does appeal to them.

That is their job is to balance those three. That is their role is to balance between clinical operation and financial because ultimately they’re held to a net cash flow number, EBITDA is that number they’re shooting for and that means they have to not only get the reimbursements they are due but they have to continually work on lowering operating cost.

They know that that does not mean buying cheap stuff. The quality and the lower cost of operations and they lowered cost of producing the evidence needed now in these models is based upon buying the high-priced because I get better quality, I get better return, I get more reliability etc. etc. They are the ones that gets that, they get it.

If I’m a department manager and being held strictly in the way that I’m reviewed in my performance etc. to an operating budget, to a capital budget then, you know, I love you buddy, but I’m not going to buy your stuff because I can’t afford it. I’m going to buy the cheap Chinese knockoff because I’ve got to make it another day.

In this period the next couple of years there’s going to be an interpretation of lowering cost on the part of materials management and in many cases where department managers is to buy more cheaply. But, in reality, they need to look at doing exactly the opposite and buy more flexible platforms that are going to yield cost savings and better evidence over these next five, six, seven years.

Same thing with patient monitoring.

Is it really cost effective to buy the cheaper version, the less expensive version?

It helps right now but we don’t even know what criteria in the next three phases of meaningful use over these next eight years, we don’t even know what that is.

We really don’t even know what the remaining number of core measures are going to be beyond the current level we have. We’ll have somewhere around 70 released upon us but we don’t really know what they are and that’s going to dictate the evidence we’re going for so we need to be flexible.

You need to make sure your customer understands that.

Now they can go ahead and buy what they’re going to buy, I just want to make sure from my credibility … you hear me out on this and I won’t reserve “I told you so” (well maybe I will reserve “I told you so” right as a sales person) … but basically I need you to know this, it’s my responsibility to let you know that you need this kind of flexibility, will you get it from us or any other one of the quality vendors out here?

TIGI can train your sales organization on this and many other topics to help you close more business.

Contact TIGI now to see if there is a fit for you.

Insight from Senior Partner Sam O’Rear

It is important to move a level above your traditional call points.

Your traditional call point is not going to be aware of all the implications coming from healthcare reform. You need to go up one or two levels. Then you get to talk with people who deal with this daily.

It’s also important you don’t threaten your typical call point, where they feel they are losing control of the situation.

We never want them to feel like they are losing control. But I think we do have to challenge them.

We have to say, “Here is what’s happening. As you know with reform, the Accountable Care Organizations (ACOs) are going to be a big part of the future. What are the current plans for this organization to be a part of an ACO?”

They are going to typically say, “I don’t know. I’ve heard about an ACO. I’m not even sure I know what that is.”

“Would you be interested in learning more about it? I’ll be glad just, you know, do a quick couple of minutes over here with you if you’d like.”

Then you say along the lines of,

• When they do the stack ranking based on your core measures or quality measures is there any prediction of where you guys are going to end up in that stack ranking?
• Has there been a predictive process? Have people done a review on that? How long?
• Your Women’s Health and your other centers of excellence, do you hear any of them talk about it when you have staff meetings?

They’ll probably reply, “I don’t go to their staff meetings. They rarely come to my staff meetings.”

“If there is a way you and I can talk to them … just kind of get an idea … because this is going to start really bearing down on you and me. I’m concerned about it, I know you will be and I know that is going to be an increasing expectation. You are going to have of me to be able to address that and prepare you for some of those discussions in relation at least to patient monitoring.”

This is a way you become invaluable to your call point. They are not threatened by you.

Instead, they are so grateful for you. You are helping them forward their agenda and they will come to rely on your knowledge of the changing landscape.

Then you can really affect change for your selling organization.

…

TIGI can train your sales organization on this and many other topics to help you close more business.

Contact TIGI now to see if there is a fit for you.

Before we train, TIGI becomes immersed in your business.  Every exercise talks specifically to your customers’ needs. And your sales team deeply appreciates the coach who teaches them something about the industry they didn’t already know. Everybody wins.

Are you ready to represent the industry – and not just your company’s part of the industry?

When you do, you become your customer’s most trusted resource, and with that comes the real opportunities.

I recently observed an interchange between a high value customer and a mid career salesperson. The rep was a “closer.”

In our meeting the customer responded to the end of the presentation with, “We don’t have enough budget for that.”

The sales rep replied, “What if we could make this fit in your budget?”

To this the customer said, “Um, well, I don’t like the payment terms, either.”

The rep pressed on, “What if we changed the terms to meet your needs?”

The customer shifted in his chair, glanced at the clock, and then grudgingly admitted, “I have to check with my boss.”

The closer let out a soft sigh, “Great!”

We know that objections are a fact of sales life. We’ve all heard them.

Remember early in your career, when the sound of an objection leaping off the prospect’s lips was a loud and scary noise? Most of us, however, learned how to quickly “overcome” objections with an answer. Some of us may have even been caught interrupting a customer’s objection with the answer, as if we were a “quick-draw” artist. No sooner did the familiar question begin to poke its head out, and, BANG—smoking answer—stunned customer.

What an objection really is

On a level, knowing the answer is good, because it allows us to vault over the objection like a hurdler, neatly clearing an obstacle to the sale. At least this is the theory of overcoming objections.

The faster, more pithy and tight the response, the more rapidly we can move forward to the close and collect our reward. In fact, you might have been trained or may have learned to look for objections as signs of progress.

We would like to show you with a different dimension.

We take issue with the view of objections as hurdles to dash over. We see objections differently and “overcoming them” as hazardous. As a sales task, overcoming objections needs to be reversed; we’d prefer that objections be dug into.

Objections are unmet emotional needs. Rather than overcome them like a hurdler, we recommend addressing them, and meeting the need. This can only be done by digging into and amplifying the objection; a process which can be scary.

Notice that digging into the objection should not include a concession, nor should we succumb to our instincts and offer a Band-Aid fix to the hurt it exposes. Instead, the hurt a customer voices has to be probed, examined, and amplified.

There may be, and most often are many more reasons for the customer to buy wrapped around an unmet emotional need. A pricing concession doesn’t address that hurt – at all. By digging into the objection, tremendous value can be created for both parties.

In the next section we briefly sketch three strategies which might be useful in satisfying the emotional needs behind the objection, and by doing so you can create more value for your customer and yourself.

Three strategies to satisfy objections

A reality of professional selling is that customers buy people, not products.

That fact makes your credibility as a salesperson critical in the trust calculation made by your prospect. If they buy you, you can make effective recommendations.

Here we propose three key strategies to achieve greater credibility when encountering objections, i.e. un-met emotional needs:

1. Dig-in: Digging into an objection can improve the success of your deal for you and your customer. Remember, we’re not advocating that you become stubborn or antagonistic; dig into the objection. A lot of times this is called probing, but when considering objections as unmet emotional needs, it is very important to examine the objection to look for the prospect’s own personal need.

The response, “we’re not budgeted for that much,” when dug into shouldn’t increase your understanding of the budgeting process. Instead, it should highlight the prospect’s personal and emotional stake in the budget. Addressing these personal emotional needs is a key to building your credibility.

2. Wear-down: Another strategy involves wearing down resistance. This strategy is appropriate when your antenna tells you that the emotional need is to “get a discount.” This sort of emotional need is satisfied when the customers can point to a “deal” when defending the transaction to themselves or others.

If your gut tells you digging in will just get more hammering on price, then your best option is to absorb the negativity. Let your prospect run the string out without interrupting him to overcome the objection. In fact, we would advocate engaging the prospect with amplification questions. We like this one: “Tell me more about why my price is too high.”

Once the prospect has used up some energy, ask more questions that probe and provoke other objections so you can build more value before you get back to price. After all, it is better that you get all the other objections out in front of you, than have them remain nipping at your heels after a price concession. Once all of the objections are there, in plain view, you can deal with them and build value with them.

Stop, ask, absorb, and provoke.

Getting a hold of some negative energy can improve your close rate. Furthermore, when a prospect is expressing negative emotions, you have the best opportunity to build your value proposition with strategy 1.

3. Re-frame: An alternative option involves doing some repositioning. With this strategy you re-frame the discussion as one that is not aimed at getting a sale. Instead, you can position your role in the process as aimed at helping the customer make a good decision—for them. Keep in mind, that when attempting this strategy you must be genuine.

Being genuine is critical!

If you adopt a consultative approach, you can’t position only your own product/solution. You have to position your competitors’ offerings as well.

Doing things this way makes you an industry expert, with superior credibility in whatever you are promoting as a category (see the video on our homepage). To be sure, compared to your customers you are most likely an expert, even though you’ve only been promoting one solution – yours.

We would urge you to think differently, and sell solutions that fit the high value customer.

If your sales career involves a constant fight over high value customers, you should become a valued resource to those customers. Such a high value sales rep sells high value customers every solution they buy, independent of which vendor it comes from. If you have the stomach to recommend a competitor’s solution, openly, honestly and correctly, you can become a high value consultant. You’ll earn more sales too.

In Conclusion

Objections are going to happen. We have given you three strategies to create value from these objections and enhance your credibility in the sales process.

Each strategy is designed to be most effective in particular situations, but overall we challenge you to adopt the third strategy—reframe. Contingent upon the type of sales task you are facing, reframing can create a great deal of long term success, especially in complex and difficult industries. As with any sales technique, it is up to you use it to create value for your customers, and company – in that order.

TIGI can train your sales organization on this and many other topics to help you close more business.

Contact TIGI now to see if there is a fit for you.

If you’ve invested more than a few weeks in your career as a sales professional, you have stood there in horror at least once. It’s a gut wrenching scene you see in slow motion.

There is your promising, diligently worked and professionally approached prospect holding your best deal.

As you uncap your pen, your prospect’s eyes suddenly glaze over and he lurches, sending the deal spiraling into a spinning propeller. After the buzzing and grinding stops, you swoop in, tenderly scoop up the still-smoking, barely-alive deal, and rush it to the Sales Order ER.

You tell yourself, “Hey, this deal is strong, it’s a fighter, it’s gonna make it, there’s still hope.”

Hours of massaging, therapy, and rebuilding immediately follow, consuming vast resources including large amounts of your credibility and most of your schedule.

Hooray. Your wounded deal is moved out of Intensive Care and can even walk again, limping into the final presentation.

Not so fast: At the presentation, your prospect makes an unexpected show of non-support and the deal lets out shriek, collapses, thrashing around, and staining your clothes. Sadly, your brave and cherished deal once again clings desperately to life, then loses its grip and dies.

All that remains are the expenses.

TIGI has been brought into the middle of these kinds of situations many times.

Misreading the Decision Process

A common problem that causes this deal death-spiral is a misread of the decision process.

The solution to this problem requires understanding the one basic process people go through when making a decision. Correctly reading the signs and signals indicating where you are in this process is, therefore, critical to your success.

This simple and general decision process has been validated, not only by years of field sales experience, but also by scientific research.

In the next section we will describe this process and provide you with the basic elements that will allow you to diagnose and treat the problems that cause the death spiral, or better yet, avoid the whole ordeal.

How people make decisions: the three decision rules.

People use three basic rules that structure the decision process. They are as follows:

First: Minimize regret and negative emotions

The first rule people have when they encounter a decision is to minimize regret or negative emotions.

No one wants to regret a decision. What’s more, people will work hard to avoid regretting a decision.

Think about the last time you considered, but didn’t buy something from a salesperson.

If you went through a presentation and didn’t buy, chances are your motivation not to buy came from fear of regret – you didn’t want to look back on the decision and think to yourself, “I did something stupid.”

What this means for your sales career is that people tend to avoid even promising solutions to their problems, because making a decision to do something opens up the possibility of regret resulting from making a bad decision. Once things get bad enough to motivate a change, i.e. the regret of not doing something is greater than the regret of doing the wrong thing; people approach the decision to buy emotionally, not rationally.

Three psychologists recently won the Nobel prize in Economics for a research program that demonstrated this simple fact: People do not make economic decisions based on rationality. They found that people are irrational and emotional when they are behaving normally. We know, therefore, that people behave this way when interacting with you as a salesperson.

Second: Go with what feels right

The second decision rule has a “Twist.”

When approaching a decision people engage the Goldilocks rule – where it feels “just right.” That is, while people want to make the “right” decision, they have limits on the time and energy they will spend on making sure that the decision is “right.”

This means the Goldilocks decision rule has people aiming for “good-enough.”

For example, think about buying a car.

People typically pick a handful of options, and then select the right one from there. No one looks at ALL the available options because doing so would take too much time and effort, and cost too much.

Instead, we try one and find it’s too hard, then the next one’s too soft, and then we find the one that’s just right. Every time, however, the option that is just right comes from a limited group of options.

Your customers do the same – they want to make the right decision, which means they work on getting to good-enough.

What’s more interesting about the Goldilocks decision rule is it involves a switch in thinking and behavior you can see. This is the Twist.

When using this rule, peoples’ decision-supports transform from emotional into rational, because making the right decision requires some facts, figures and detail. Once they twist into the rational side in their decision process, people become interested in the stuff most sales presentations are made of—features and benefits. They need information with an appropriate level of precision for note-taking.

Your customers who have made the twist are emotionally OK with the deal, and are less likely to head for the propeller with it, unless the facts and figures raise an emotional issue. The need to avoid this potential problem leads to the final decision rule.

Third: Build a justification with reasons

People are motivated to make decisions that are easy to justify. This decision rule unifies the emotional and rational components of the process. In general we believe in and value simple and straightforward explanations more than complicated reasons and explanations.

In the field you will notice this rule spring into action when a customer begins to repeat back your features and benefits in their own words.

They will say things like, “The shape of this widget is best for my hand, and meets my storage requirements,” after you have pointed out the ergonomics and efficient design of your widget. When you see this rule engage, it is often time to move to the close. Make sure that the customer’s paraphrase of your feature and benefit is not just a question for clarification, but is in fact a reason for buying.

All of us have had this rule activated after buying something we’re really excited about. The justification rule has a fairly long activity span, and you may recall demonstrating your new car’s cup-holders and trunk space to your friends long after the check was signed and you brought the car home.

By demonstrating the benefits of your new purchase, you were following this decision rule. On the other hand, it is highly unlikely that you bought something you were excited about but were unable to describe why you bought it. So, when a customer can point to why they bought, they are following the justification rule.

The decision process in action.

These three decision rules come in order, beginning with an emotional phase followed by a rational phase.

As the first rule points out, decisions are made or avoided for emotional reasons. Most of the time people try to avoid negative emotions and regret when they have a problem they want to fix by ignoring the problem.

Second, once sufficiently motivated to do something about their situation, people look for a set of options and zoom in on what is “just right” or good enough within that group. During this process they twist into rational beings and begin to assemble the information needed to justify the decision.

Finally they take the next step and become able to justify their reasons for buying. If they can justify to themselves and others that this decision is a good one, they move ahead and buy.

You should be able to determine which mode your customer is in when they meet you, based on these three decision rules.

Remember, the reason for making a decision is originally emotional, so if you meet a prospect who is asking for a ton of information, facts, figures, features and specifications, you can safely assume they are justifying buying someone else’s solution.

Your job in this situation is to probe for the emotional reason motivating this decision process.

Additionally, prospects may even mimic the justification rule as they verbally repeat your features while mentally tallying your benefits up against an unseen list of features and benefits in their head.

DO NOT just give them the information they ask for without knowing the core emotional reason THEY WANT TO BUY YOU! – not your product! Otherwise, you might mistake their enthusiasm for a positive buying signal.

You might even forecast the deal, only to watch the prospect glaze over, begin to drift and then gain speed as your deal spirals toward a spinning propeller – buzz, grind, gasp, and nothing left but the expenses.

TIGI can train your sales organization on this and many other topics to help you close more business.

Contact TIGI now to see if there is a fit for you.

“We didn’t budget for this much.”

Can you relate?